Halliburton, Baker Hughes Deal Breaks Off On Antitrust

Halliburton

Halliburton will be required to pay a breakup fee of $3.5 billion to Baker Hughes by Wednesday.

The $28 billion merger deal between the two oilfield services companies, Halliburton Co. and its rival Baker Hughes Inc., has been terminated due to disapproval from antitrust regulators in the U.S. and E.U.

The companies, counted as No. 2 and No. 3 for the biggest oil service providers, raised concerns that their merger would increase prices in the sector. Antitrust laws have been plaguing the companies and keeping large mergers from forming.

“Challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,” Chief Executive Dave Lesar of Halliburton said.

The $34.6 billion cash and stock acquisition contract from Halliburton has been devalued to $28 billion. The companies have not agreed on extending the contract that expired Saturday, according to Reuters citing a person familiar with the matter early Sunday.

With the deal over, Halliburton is required to pay Baker Hughes a $3.5 billion breakup fee by Wednesday.

The U.S. Justice Department filed a lawsuit the month prior against the merger as it argues that the market will only have Schlumberger NV aside from the merged company for suppliers spread over 20 business lines including global well drilling and oil construction services.

“The companies’ decision to abandon this transaction – which would have left many oilfield service markets in the hands of a duopoly – is a victory for the U.S. economy and for all Americans,” U.S. Attorney General Loretta Lynch said Sunday.

Reduction of competition and innovation are the main concerns of the European Commission regarding the deal.

In the past 18 months, enforcers of the U.S. antitrust laws, the Justice Department and Federal Trade Commission, have filed lawsuits against an uncommonly high number of merger deals. Last month, Lynch said that the unusual number of huge and intricate deals put on the table was “a unique moment in antitrust enforcement.”

Halliburton and Baker Hughes have been struggling to cope with lower energy prices and its impact on their clients.

Baker Hughes reported a larger first-quarter loss last week that was larger than the company expected and fewer new projects which could cause the global rig count to drop steadily.

Halliburton cut over 6,000 jobs in the first quarter and suffered $2.1 billion in restructuring for severance costs and write-offs as the company took a 40.4 percent hit in its revenues.

Investment bankers who advised the company on the deal were also hit as the cancellation denies them any gains that they would have made as a percentage of the deal’s value if it was completed.

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